Best Income Tax Saving Mutual Funds
Taxes are unavoidable and they will most likely roll into your income this year. But with the right knowledge, you can use strategies to minimize the taxes you pay.
What is Tax?
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures. In general, a tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures. Taxes are collected by the government at different rates.
How do tax savings?
Tax-saving mutual funds are investment vehicles that allow you to invest in equity funds which are a part of the tax-saving scheme. These schemes give you an opportunity to invest in securities that hold a long-term view on investments and come with a lock-in period of 3 years or more. You can also get access to tax-saving schemes like EPF (Employees Provident Fund). NPS (National Pension Scheme), and ELSS (Equity Linked Savings Scheme) is popularly known as LIP (Long Term Investment Plans).
Tax Saving NPS Scheme
The National Pension Scheme was introduced by the government in 1955 for salaried class employees. The objective behind this scheme is to provide pension benefits to retirees at the retirement age or the death of their breadwinner. The National Pension Scheme provides life cover, medical cover as well as death benefits in case of permanent disability or premature death due to any reason
Tax-Saving Investments Under Section 80C
Section 80C of the Income Tax Act, 1961 (ITA) allows you to save taxes by investing in tax-saving mutual funds and investment schemes. You need to have a minimum of Rs 1.5 lakh to invest under Section 80C.
The tax benefits under Section 80C are as follows:
Tax-saving investments are those specified in the Schedule VI of the ITA. The scheme promoters have to follow certain requirements set out in the Act to be eligible for tax concessions under this section.
The investment cost is not included while calculating your total taxable income.
Public Provident Fund (PPF)
PPF is an investment plan that involves depositing money in a special account managed by the government or an authorized institution such as LIC, SBI, or HDFC. The interest earned on these deposits is used to buy units in special funds called Public Provident Fund (PPF).
The idea of PPF was first introduced in 1961 by India’s then Prime Minister Jawaharlal Nehru. Today, PPF is one of the most popular investment options for individuals looking to save for retirement.
How to Plan the Tax-saving Investments?
The tax-saving investments can be planne in a number of ways. For example, you can invest in a tax-saving investment plan with your salary. You can also invest in stocks and bonds by making use of mutual funds.
Most taxpayers delay tax planning till the last quarter, which results in hassled decisions. So, it is better to start planning from the beginning itself. If you are not sure about how much money to save for retirement, then you can consult an expert who will help you develop a tax-saving investment plan for your future.
Conclusion
Each nation is free to set tax policy as it wants for its local economy. There are two types of taxes: indirect and direct. The first type of tax is paid by one person or organization on behalf of another person or organization. Indirect taxation is usually a percentage based on the sale price. In order to reduce the diminishing effect by adding more persons. The government levies a direct tax upon an individual as well as an organization. It includes income tax, sales tax, value-added tax, excise duty, and consumption tax. Taxes come with advantages and disadvantages, among these advantages being funds for development by the country’s government and reduced tempo in consumption of goods.
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